Judge Rhodes Rules Detroit Is Eligible For Bankruptcy

**jaytheory** · December-03-13, 10:54 AM

Sorry for those who will be hurting from this.

I hope this gets Detroit on its feet in the future. the future of the city is at stake. we have to think about the children and continue the city

http://live.freep.com/Event/Detroit_...bility_hearing

**313WX** · December-03-13, 10:57 AM

Nothing unexpected so far. He also says that the Pensions CAN be cut as the clause in the Michigan constitution is a contractual obligation. Don't have the article to post here [[I'm on my smartphone).

**313WX** · December-03-13, 11:00 AM

And of course, Kevyn Orr/PA 436 stays.

**professorscott** · December-03-13, 11:18 AM

Just cleared the last hurdle: Detroit did not negotiate in good faith, but to do so would have been impracticable. Final ruling should come in a few minutes.

**mwilbert** · December-03-13, 11:36 AM

Originally Posted by 313WX

Nothing unexpected so far. He also says that the Pensions CAN be cut as the clause in the Michigan constitution is a contractual obligation. Don't have the article to post here [[I'm on my smartphone).

http://www.freep.com/article/2013120...hodes-pensions

**mwilbert** · December-03-13, 11:41 AM

Of course there are people who need every penny, but I expect the cuts to be relatively modest. The way pension math works, small cuts turn into large savings, and the actual level of underfunding is still in dispute. As real estate and stocks have continued to recover, the pension funds should be looking considerably better than they did even when bankruptcy was filed.

**BankruptcyGuy** · December-03-13, 11:41 AM

Wow. Just wow. I didn't think that the Judge would rule on the pension issue today. I don't think anyone did.

The unions have made a monumental miscalculation that will cost the pensioners. They could have deferred the objection to the plan stage, and negotiated a better plan. Now what do they have to negotiate with, a threat of appeal? Good luck.

Oh, by the way, any objectors will have to get the judge's permission to appeal presently. It's called an "interlocutory appeal" and is not allowed in most cases.

That was a foolish, emotional move by the unions. And it cost their members big time. Shame.

Again, they should now negotiate their best deal, and take it. This judge is unquestionably putting residents and services first.

**nativegirl** · December-03-13, 11:45 AM

Hopefully its only small cuts. If not, I would expect another "housing crisis" like after the big downturn in the economy in 2008, 2009 and 2010. A lot of retirees especially newly retired, still have house payments.

**Gistok** · December-03-13, 11:48 AM

Thanks Bankruptcyguy!

Any word on the DIA assets?

**getmoore** · December-03-13, 11:51 AM

Let the healing begin.........

**Wesley Mouch** · December-03-13, 12:28 PM

Originally Posted by 313WX

Nothing unexpected so far. He also says that the Pensions CAN be cut as the clause in the Michigan constitution is a contractual obligation. Don't have the article to post here [[I'm on my smartphone).

CAN is not WILL. Mr. Orr will craft a responsible plan, and the judge will review and approve or not.

And ultimately he cannot reduce the pensions below their actual funding level, which the trustees report as something north of 90% and Orr reports as something less.

Here's a question. How much can Orr craft the cuts. Does he just have to say everyone is going to get 95% of their pension -- or can he say people under $20,000 per year are taking a 1% cut and those over $100,000 will take a 50% cut?

Another question... an appeal has been filed of course. What is that process? Are appeals typically successful? Do they stop the process? That Rhodes ruled on the pensions suggests to me that he knows that this process must start moving fast. The pensioners no doubt want to stall this and hope that Orr is gone before he can get his job done. What's likely to happen?

**Eber Brock Ward** · December-03-13, 01:10 PM

I think this is good for workers, generally, though not good for the Detroit pensioners.

The sooner we can get away from defined benefit pensions, the better for workers. I don't even expect Social Security to be there for me as a thirtysomething, let alone any muni or company's pension.

**Scottathew** · December-03-13, 01:49 PM

Originally Posted by jaytheory

Sorry for those who will be hurting from this.

I hope this gets Detroit on its feet in the future. the future of the city is at stake. we have to think about the children and continue the city

http://live.freep.com/Event/Detroit_...bility_hearing

I agree with your angle and tone.

It's tough to see pensioners be put in this situation, but we've got to change things. I have a feeling that cuts won't be drastic and that creditors will take a much larger haircut than pensioners.

**professorscott** · December-03-13, 01:57 PM

Originally Posted by 48307

I have a feeling that cuts won't be drastic and that creditors will take a much larger haircut than pensioners.

Certainly. Remember it's not pensions as a whole that are in play in the bankruptcy, just the unfunded portion. There is great disagreement on how much that it, but just for example, let's assume the pensions are 90% funded, and all unsecured creditors end up getting 30 cents on the dollar. [[Again, caution: I'M JUST MAKING THESE NUMBERS UP.)

In that hypothetical, pensioners would get all of the funded portion plus 30 per cent of the unfunded portion, so they would end up getting 93% of what they had expected. On the other hand, a typical unsecured creditor would just get 30% of what was owed.

Now, a 7% cut to someone on a fixed income is not at all pleasant, and my heart goes out to all these folks that gave their working life to the City. But it's not the same pain the creditors will feel, and it isn't the disaster some have been predicting.

**BankruptcyGuy** · December-03-13, 01:59 PM

Originally Posted by Wesley Mouch

CAN is not WILL. Mr. Orr will craft a responsible plan, and the judge will review and approve or not.

And ultimately he cannot reduce the pensions below their actual funding level, which the trustees report as something north of 90% and Orr reports as something less.

Here's a question. How much can Orr craft the cuts. Does he just have to say everyone is going to get 95% of their pension -- or can he say people under $20,000 per year are taking a 1% cut and those over $100,000 will take a 50% cut?

Another question... an appeal has been filed of course. What is that process? Are appeals typically successful? Do they stop the process? That Rhodes ruled on the pensions suggests to me that he knows that this process must start moving fast. The pensioners no doubt want to stall this and hope that Orr is gone before he can get his job done. What's likely to happen?

To answer the first question, the plan need only be "fair and equitable." Both an across-the-board cut and a progressive cut could be considered fair and equitable, considering the circumstances.

To answer the 2nd question, the judge will have to grant the right to appeal at this point. Until the final order of the court, an appeal is considered "interlocutory" and thus requires court approval. No, Judge Rhodes will not stay the case pending an appeal--I'm pretty sure he said that in court.

**corktownyuppie** · December-03-13, 02:20 PM

Originally Posted by professorscott

Certainly. Remember it's not pensions as a whole that are in play in the bankruptcy, just the unfunded portion. There is great disagreement on how much that it, but just for example, let's assume the pensions are 90% funded, and all unsecured creditors end up getting 30 cents on the dollar. [[Again, caution: I'M JUST MAKING THESE NUMBERS UP.)

In that hypothetical, pensioners would get all of the funded portion plus 30 per cent of the unfunded portion, so they would end up getting 93% of what they had expected. On the other hand, a typical unsecured creditor would just get 30% of what was owed.

Now, a 7% cut to someone on a fixed income is not at all pleasant, and my heart goes out to all these folks that gave their working life to the City. But it's not the same pain the creditors will feel, and it isn't the disaster some have been predicting.

Is there somewhere definitive that states that the funded portion of the pensions is untouchable by bankruptcy court? having a conversation with some clients and he is hearing from his union brothers that I'm incorrect and that the whole thing could be cut.

**BankruptcyGuy** · December-03-13, 02:28 PM

Originally Posted by corktownyuppie

Is there somewhere definitive that states that the funded portion of the pensions is untouchable by bankruptcy court? having a conversation with some clients and he is hearing from his union brothers that I'm incorrect and that the whole thing could be cut.

Remember, the pension is a fund that has assets. Those assets don't belong to the City. The liability at issue was the City's obligation to give the fund extra dollars if the fund's assets are insufficient to pay its bills.

Given the court's ruling today, the bottom limit would be that that City pays $0 toward that unfunded portion. The existing assets would fund [[a portion of) existing pensions. There is nothing to indicate that existing pension assets would be consolidated into the City's bankruptcy.

**mwilbert** · December-03-13, 02:31 PM

Originally Posted by Eber Brock Ward

The sooner we can get away from defined benefit pensions, the better for workers.

I don't agree. The move to defined contribution plans is not working out well.

I don't even expect Social Security to be there for me as a thirtysomething, let alone any muni or company's pension.

Obviously this is just my opinion, but it is very unlikely that Social Security will not exist in 30 years. It is possible the real value of the benefit will be somewhat less than it is today, particularly if you end up being relatively affluent. Even if no changes to fix the current modest actuarial imbalance were made at all, there should be sufficient money to pay about 75% of the expected benefits until after you are dead [[barring serious medical advances).

Of course, by that time there will have to be some broader welfare programs to deal with the widespread unemployment which will be created by the replacement of most labor by automation.

**Eber Brock Ward** · December-03-13, 02:36 PM

Good catch, mwilbert. I should have written that "I don't even expect Social Security to meaningfully be there for me as a thirtysomething, let alone any muni or company's pension."

**Danny** · December-03-13, 03:07 PM

Detroit is officially BANKRUPT! folks.

Your city government will not pay your benefits.

Pensions will be cut, OH BOO HOO HOO!

Art for the DIA will be liquidated, OH BOO HOO HOO!

It's all Cavanaugh's fault, OH BOO HOO HOO!

It's all Coleman's fault, OH BOO HOO HOO!

It's all Kwame's fault, OH BOO HOO HOO!

No plan to cut spending, No plan to borrow more money. Snyder's puppet is calling the shots. There's nothing Detroiters and its city unions can do to appeal the judge's ruling. Appeal and protest all you want, that will not stop the creditors and banks of want their money back. That's what you all get if they borrow money and not paying back on time.

OH BOO HOO HOO!

OH BOO HOO HOO! Detroit is BANKRUPT!

OH BOO HOO HOO! My Pensions will be cut

OH BOO HOO HOO! Art from the DIA will be liquidated.

OH BOO HOO HOO! It's all Cavanuagh, Coleman, Kwame and Dave Bing's fault.

Yes, Judge says,"SELL IT ALL!"

**Wesley Mouch** · December-03-13, 04:06 PM

Originally Posted by BankruptcyGuy

To answer the first question, the plan need only be "fair and equitable." Both an across-the-board cut and a progressive cut could be considered fair and equitable, considering the circumstances.

To answer the 2nd question, the judge will have to grant the right to appeal at this point. Until the final order of the court, an appeal is considered "interlocutory" and thus requires court approval. No, Judge Rhodes will not stay the case pending an appeal--I'm pretty sure he said that in court.

Thanks, BG!

Simple progressivity to whatever cuts are 'fair and reasonable' would make them much more palatable. Let's avoid hitting those with small pensions. And let those more fortunate carry their less fortunate brothers.

**Det_ard** · December-03-13, 04:19 PM

I'll just throw this out there, but if it turns out that Detroit pensioners do end up taking a big cut, is there a chance their union brothers and sisters will chip in to help make them whole? There's a lot of money still in the UAW, AFL-CIO, SEIU, ASFCME, etc. All for one, one for all, Solidarity, ...?

**corktownyuppie** · December-03-13, 04:48 PM

Originally Posted by Wesley Mouch

Thanks, BG!

Simple progressivity to whatever cuts are 'fair and reasonable' would make them much more palatable. Let's avoid hitting those with small pensions. And let those more fortunate carry their less fortunate brothers.

In his interview with the Freep this afternoon, Kevyn Orr alluded to having "multiple classes" of pension recipients getting different settlements. So it could be working vs. retired...it could be by income level. it could be 50 and under, 50-70, 70 and up...wouldn't give details.

So I think we're all aiming at a the most equitable way to do this, and now that the union can't sit with there arms crossed, saying "no cuts!", we might be able to work something out.

**jt1** · December-03-13, 05:23 PM

Originally Posted by Det_ard

I'll just throw this out there, but if it turns out that Detroit pensioners do end up taking a big cut, is there a chance their union brothers and sisters will chip in to help make them whole? There's a lot of money still in the UAW, AFL-CIO, SEIU, ASFCME, etc. All for one, one for all, Solidarity, ...?

hahahahahahahahahahahaha. Best laugh in days. Just like the 'solidarity' of the UAW that supported two tier wages?

**Ray1936** · December-03-13, 06:54 PM

Free Press listed a series of interesting scenarios:

■ Orr might shield the city’s oldest and poorest retirees and cut deeper into the pensions of younger, somewhat better off retirees.
■ He might impose the cuts equally across the board but phase them in over a number of years, in effect offering a measure of protection for older retirees.
■ He might cap pension payments at some basic amount, requiring cuts only to those getting the biggest retirement checks.
■ Orr could leave pensions for current retirees relatively intact but impose deeper cuts on the active workers who remain years short of retirement age.
■ He might impose smaller cuts on the city’s retired police and firelighters because their pension fund, the Police & Fire Retirement System, is in somewhat better shape than the General Retirement System fund for the city’s non-uniformed retirees.

Logical possibilities. Meanwhile, Danny, go away. You're not funny.